Friday, December 16, 2011
Tuesday, December 6, 2011
Just remember from a trading aspect, don't buy in an anticipation of a chart formation break out, it might not pan out. Buy the break out and sell soon then wait for a pullback to buy again, if your looking for a trade. Especially in the case of wedges, as a friend restated to me the other day, 90% of the time in my experience, a wedge formation that reaches its apex without a significant move one way or another, will most likely eventually break down. Remember "what can't go up, must go down and vice versa".
Regardless, lets say this, I suspected we wouldn't see gold start making a move till late nov. its now early dec and we are at least showing promise. if we break out buy years end a rally could last on gold for 2-3 months, and show us an easy say, 2100. HUI, that could be 650+. Point is, my original gut, fundamentals, and technicals are coming together at the same time, and thats usually served me well... make you own assessment. below is the chart.
And remember, be careful out in that financial world, it's scary.
Monday, September 5, 2011
Monday, August 15, 2011
The other currency that is weighted the 2nd most on the USDX is the Yen, which despite Japanese government intervention to keep it from appreciating too much after such a devastating disaster like they've had, has mostly fallen on deaf ears as far as the currency market is concerned. The USD/YEN is now trading at 76.75 currently and that is the dollar's lowest level against the yen since as far back as any of the charts I have will go. (Which is 1976 for the record.) Despite a less than desirable economic situation in Japan that has been on going for a very long time, traders have still taken this to be a "safe haven" currency when compared with a currency that is now obviously beginning a downward spiral into hyperinflation. From a trading standpoint, buying the yen at a test of the 200 day MA has been a strategy that has been quite profitable for almost 4 years now.
The next currency I wanted to mention is that of our northern neighbors. (If you're Canadian and you are reading this I mean you, there is no need to look more north. I do not believe the North pole has a currency, but if they do I am certain it is rapidly appreciating against the USD as well.) The USD put in an all time low against the Loonie back in 2008 at 90 cents. It is currently 98 cents, and at all attempts by the USD to rise against it, have been kept from getting above par for almost all of this year. Let's keep in mind, this is from a high hit in 2002 of about 1.62. In other words, the USD has lost almost half of it's value against the Loonie. Now, here is an example of a country that lost it's AAA rating, balanced it's budget, and regained it again. They also have a much lower business tax rate than us. Well, If they can do it why can't we? I suppose somewhere in the 5th dimension of planet X it may be possible to cut a 1.6 trillion dollar deficit and pay back a 14 trillion dollar debt without causing a catastrophe of epic proportions, but lets also not forget the cardinal difference in the two dollars; The Canadian dollar is backed by and exchangeable for silver, The US dollar backed by...nothing. Unless you put a lot of faith into the promise of the US government and the Bernank. By that standard I have a hard time understanding why the USD is as high as it is VS the Canadian.
The next one I want to discuss is the Aussie. Which I am particularly fond for many reasons. Being a commodity country it should be no surprise that this currency has been moving higher against the USD. In fact, the Aussie DID reach a high of 10% higher than the USD. The growth story is China. Australia has the materials they want and need, and they are only a hop, skip and a jump away. Australia maybe for that reason the only "western economy" that makes it out of this mess alive. If you couple in some beautiful scenery, and warm weather, It shouldn't be a surprise to anyone who knows me that Australia is where I plan to retire in while the SHTF (as well as Kangaroos. In NYC, you have to deal with rats, eww. In NJ where I live, you have to deal with deer, which are essentially big rats except I never knew anyone who ever totaled their car from hitting a rat. At least in Australia their local wildlife hops around in a very amusing manner, and if your in the right place at the right time, you can catch a free boxing match. I've never seen a rat do that before.)
Finally, lets look at the Swiss Franc, which has gotten a lot of attention recently. The Franc, which is also at a more than 30 year high against the dollar (again that's as far back as my charts can track it), has been intervened by the Swiss central bank as well do to it's rapid ascent against the USD. (They're very concerned about their ability to sell those nifty little knives over seas.) All intervention on their part was wasted effort, as traders quickly reversed it's move and continued it's rise. The recent news of possibly linking the Franc to the Euro did however scare traders and the dollar was able to make an ever so slight 'pop' against it's waterfall like move downward. The legality of this is up for debate. The logic of this is not however. If you ask me, that comment was simply an "ends justify the means" scenario. Why the Swiss, or anyone else for that matter would want their currency linked to the Euro is beyond me but for the time being, they got their wish and the Franc pulled back a touch. All in all, it remains a better place to hold money than USD and will most likely continue to be, and continue to follow gold higher.
Wait, you didn't think I was going to write an article about currencies and NOT discuss the ultimate currency did you? What can I say about gold? Hmmm... I guess, hold on. After rises like the one gold has you can often find yourself in an odd predicament. On the one side, it's gone up a LOT in a relatively short time frame, so you may be tempted to take some profits there. On the other, a massive rise like this shows just how much strength this market has and going against the trend can prove to be very unwise. So what should you do? Simple, I'll tell you exactly what I am doing. Hold onto the gold you own, taking profits on leveraged positions is common sense after this run, but don't sell what you rightfully own outright. As Jim Sinclair said a few days ago, "taking profits on bullion and rolling into good gold shares now is just common sense." There is a lot of great growing companies out there, and a few that are now paying decent dividends as well, but remember PROFITS! Don't go and sell all your gold for miners or vice versa. A good formula has been to have a good amount of both. The miners do outperform the metal when things are going their way, but when the market moves down 600 points and gold moves up $50, having all you money in miners is a losing day for you. Bullion hedges your stock market risk, miners offer company growth, massive profit margins and dividends, which is the biggest argument for why bears say not to own gold, because it can't pay a dividend, well the right miners can. (Granted, those same people will turn around and tell you to sell all your worthless gold and buy Apple, which also does not pay a dividend, but whatever. Just wanted to point that out.)
Ok, that's all folks. Remember to keep your hands in the vehicle, leave your seat belt attached at all times and don't forget, this ride has been known to inducing vomiting. Good luck out there!
-Jonathan M. Mergott
Monday, July 11, 2011
Saturday, June 25, 2011
Tuesday, May 17, 2011
Friday, February 4, 2011
There are a lot of people I listen to on their market analysis, but simply for their interpretations of market action. There will always be things that occur that you didn't think of, this is why it is good to hear another's side of the story. But there is no need to ask anyone what the market is doing. The market will tell you! You just need to listen to it! The common opinion in the gold camp these days is that we will have a drop to about $1250-1225 area where we will be able to find the strongest support. The other opinion is that we are due for a test of the 200 day MA, which stands only about 2% higher than that 1250 support point. Why would we have a test of the 200 day MA? Well, because doing so is simply natural in markets, and anyone who doesn't understand gold, would think that this is inevitable. My friends, gold has not tested the 200 day MA in 2 years! I am of course not ignorant enough to think that it never will, but that alone should tell you something. This market has showed us bottom/top callers of all sorts that come out on gold's natural and healthy (although sometimes violent) corrections to participate in the signing of the metal's death certificate. The consensus is almost never seen. When looking at gold's correction in Dec '09, after reaching $1225/oz, the consensus, the logic, was for it to fall to a strong support point of around $1000/oz (which again was also within about 1.5% of the 200 day MA). It didn't. Instead it stopped about 4% above that point and made everyone who was looking for that "sweet spot", chase the price up higher for all of us that were buying on the way down to it.
Of course we will not buy based on one thing alone, so let's look at the rest of the technical picture gold has painted for us to see. You can notice at the top, that each one of those bottoms, those tests of the 30 week MA has coincided with a bottom in RSI at roughly the 50 mark. Look at where RSI stands right now as we close out this week. 54.89 and beginning to turn upwards. Looking at the slow stochastics we can see that it is flattening and ready to turn upwards again at roughly the exact same level it was at the bottom of the correction this time last year. MACD, which has deviated quite a bit from the MA, which has typically depicted a bottom when looked at it in conjunction with the other indicators. Now, you take all that with the fact that gold stopped dead right upon the 30 week MA, sprinkle on some extremely low bullish sentiment, and viola! You have the makings for one sweet, golden, money-making rally!